Need to Know: Here’s how Uncle Sam could snuff out a Santa rally in stocks

From the Captain Obvious camp comes this observation: There are two things likely to happen by year’s end — the market heads for a big shakeout, or the traditional final flurry of buying pushes stocks to new highs.

While that last hurrah for stocks — referred to as the Santa Rally — could still come, a selloff of late for techs has gotten some nervous. And yesterday, the selling reached the broader market.

The blame for that went, in part, to profit taking. But others have suggested investors have been fretting after taking a closer look at how the Republican tax bill could affect corporate earnings. One worry is that tech companies (for one group) could get hit harder by corporate Alternative Minimum Tax (AMT). The measure was removed from the House tax bill, but included in the Senate bill — something that must be resolved to get the overall plan passed.

Read: Here’s how violent the stock-market rotation out of tech has been

That brings us to our call of the day from Peter Schultz, chief strategist of The Winning Secret newsletter, who says there are more bear traps in this tax bill that could hobble a year-end rally. As well as the AMT, a capital-gains tax known as FIFO has been buried in the bill by Senate Republicans, he notes.

“If the House bill keeps these penalties in place, we could see a lot of stock dumped in late December in order to be taxed under the old rules,” says Schultz.

Under FIFO (which stands for “first in, first out”), individual investors would be forced to sell the oldest lots of any stocks first — say, those Apple shares a baby boomer bought back in 2011 for around $50. And those shares are usually loaded up with the most capital gains.

Schultz suggests investors may rush to sell such shares before the end of the year, even if they don’t want to, rather than risk a big tax hit by holding them past Dec. 31.

Also weighing on in FIFO is Thomas J. Faust, chairman and CEO of Eaton Vance. The government could generate $2.4 billion of new tax revenue over the next 10 years with this measure, he says, but it “punishes American investors.”

“Besides inhibiting investor choice and causing capital gains taxes to go up, the FIFO provision would also complicate the financial planning of millions of American investors and increase the extent to which taxes distort their investment decisions,” says Faust in a post for WealthManagement.com.

Key market gauges

The early going is looking a little tough across the board, with the Dow DJIA, +0.08%  and S&P battling for some green, and the Nasdaq COMP, +0.18%  also struggling. The dollar DXY, +0.27%  is largely flat, while gold GCG8, +0.14%  is bouncing off four-month lows.

Oil prices CLF8, -1.41%  are moving south ahead of key U.S. supply data due later.

Europe SXXP, -0.09%  is on course for its second-straight loss, knocked back by techs. Asia ADOW, -1.20% mostly fell, led by drops for tech and commodity-linked shares.

See the Market Snapshot column for more.

The chart

As bitcoin BTCUSD, +6.22%  tears past $12,000 this morning, with a market capitalization that rivals some big U.S. companies, here’s some food for thought: The crypto frenzy could be bad for the environment.

The Bitcoin Energy Consumption Index from Digiconomist, shown in the chart below, puts the annual electricity consumption involved in mining the digital currency at around 31.96 terawatt hours:

The chart popped up in an article by meteorologist Eric Holthaus that’s been going viral. In his piece for environmental magazine Grist, Holthaus says bitcoin could steal a clean energy future from the world, as he lays out just how much energy could be eaten up.

“Today, each bitcoin transaction requires the same amount of energy used to power nine homes in the U.S. for one day,” he says. “By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.”

Opinion: This new way to trade bitcoin could kill its rally

Also check out: The most important people to follow in crypto

The buzz

Amid troubles reaching a reciprocal agreement with Amazon AMZN, +0.98%  over selling Google Home, Chromecast or Nest products, Alphabet GOOGL, +1.13%  is pulling YouTube from Amazon Echo Show and Fire TV streaming devices.

DaVita DVA, +10.18%  is soaring on a deal to sell its doctor group for $4.9 billion to UnitedHealth UNH, +0.58%  .

Fred FRED, -20.83%  is taking a hit after the retailer posted weaker-than-expected results and canceled its dividend.

Tim Cook, CEO of Apple, said he “couldn’t be happier” about iPhone 10 sales in China, while speaking at the Fortune Global Forum in Guangzhou.

UPS UPS, -1.32%  is warning of delivery delays in the crucial holiday season owing to a surge in shipments from online shoppers.

Shares in Funko FNKO, -2.15%  , which makes pop-culture-themed toys and products, shot to the highest levels since the IPO after its first earnings report.

The stat

Man pictured laying by a garbage can, November 10, 2017 in Los Angeles, California,

Nearly 554,000 — That’s how many people were homeless across the U.S. this year, for the first increase since 2010, according to the U.S. Department of Housing and Urban Development.

Those numbers have been driven by a jump in people sleeping rough in Los Angeles and other West Coast cities, the annual Point in Time tally from DHUD shows.

The quote

“The galvanizing actions of the women on our cover…along with those of hundreds of others, and of many men as well, have unleashed one of the highest-velocity shifts in our culture since the 1960s” — That’s Time Magazine’s editor-in-chief Edward Felsenthal, in a statement about the magazine’s decision to name “The Silence Breakers” as its 2017 person of the year. Those are the many individuals such as actress Ashley Judd, the first to go public, who helped expose the prevalence of sexual harassment in entertainment, technology and other sectors this year.

Random reads

U.K. foils plot by Islamic extremists to assassinate Theresa May.

French rock star Johnny Hallyday, dead at 74

Rep. Al Green says he’ll force a Trump impeachment vote Wednesday

Wind-fueled Southern California wildfires are getting worse

On its 100th anniversary, woman tweets her grandfather’s account of the Halifax Disaster

It’s 100 years since Finland got its independence

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